A proposal by the Vietnam's finance ministry to impose export tax on steel billets is facing a wall of resistance from local traders and mill operators.
The Ministry of Finance proposed to the Vietnam government a 5% export tax on steel billets, from nil currently, and reduce import tax on some construction steel products on July 14. The aim is to stabilize local steel prices, which have been under pressure recently as the pandemic crippled domestic demand.
Vietnam played a major role in exporting billets to China and the Philippines in the last few years. According to S&P Global Platts data, 22 deals to China were observed in H1 2021 and 53 in full year 2020.
"If it is approved, it would likely contribute to stabilizing billet supply, prices in domestic market, and cooling down billet export," according to a Vietnamese billet trader.
The proposal comes at a time when the domestic steel industry is battling with sluggish demand, as coronavirus-related lockdowns hampered steel production. Vietnam's economic hub Ho Chi Minh City imposed a two-week lockdown on July 9 to contain a fresh outbreak of COVID-19.
"Due to the lockdown, all the workers in mills need to stay in the plant yard," a Vietnam-based mill source said.
For imposing a billet export tax, now may "not be the right time", the source said.
Meanwhile, a China billet importer told Platts that Vietnam mills have added a clause on billet export contracts regarding the potential risk of increased export tax, and that buyers would bear 100% risk on tax changes.